Greece: GDP drops at softer pace in Q1
GDP contracted at a notably slower pace of 2.3% year-on-year in the first quarter, following Q4 2020’s 6.9% dive. However, Q1 marked the fifth successive quarter of shrinking output, highlighting the country’s economic susceptibility to the Covid-19 pandemic. Q1’s softer downturn was largely attributed to a notable improvement in fixed investment, which expanded 8.6% in annual terms (Q4 2020: +3.2% yoy). However, government consumption growth lost steam in the quarter (Q1: +4.9% yoy; Q4 2020: +7.3% yoy), while private consumption slid 4.9%, matching Q4 2020’s result. The nationwide lockdown in place throughout the quarter weighed significantly on domestic activity and household spending in particular.
On the external front, exports of goods and services fell at a softer, albeit still-pronounced, pace of 13.4% in annual terms in Q1 (Q4 2020: -17.6% yoy), as the second wave of Covid-19 in Europe led to tighter restrictions in key trading partners, also hampering the crucial tourism industry. Similarly, the decline in imports of goods and services moderated to 5.0% from the 8.8% drop tallied in the prior quarter, highlighting frail domestic demand.
Lastly, on a seasonally-adjusted quarter-on-quarter basis, economic growth accelerated to 4.4% in Q1 from 3.4% in the previous quarter.
This year, the economy is seen bouncing back from 2020’s pandemic-induced plunge. Following a tough H1 owing to the tight lockdown restrictions in place, the recovery is expected to shift into a higher gear in the second half of the year. Progressing vaccination efforts will enable the gradual lifting of restrictions, releasing pent-up demand and kickstarting the all-important tourism industry. However, much depends on the pace of the vaccine rollout, with any delays clouding the outlook. On top of this, the country’s significant external and public debt levels remain a key downside risk.